country were using it, and we would be induced to buy it, and have machines of that kind frequently during the time we were operating under the old state of affairs. There was so much of that happening all of the time, every year, that we were not making any money. We had not the service that we have to-day in the matter of taking care of the machines. My younger brother, who was superintendent and is yet superintendent of the manufacturing department, is a very good machinist himself-of a mechanical turn of mind—and he was able to take care of our machines as best we could and did, but we were gradually handicapped by the time it would take him to take care of the machines and fix them up and put them in running order, and his time was taken away from his legitimate business of looking after the manufacture of shoes-so much so that I used to complain about it. But his reply always was: "We can not make shoes unless we have the machines running; the machines have to be fixed, and nobody can fix them but me."

We have had cases where we have stood a loss of several hundred dollars. There is one particular case that I might mention as a concrete illustration of what I am trying to explain. There was what was called a Tapley heel-burnishing machine which was used in putting the finish on heels and bottoms of shoes, after blacking, to polish them and burnish them, bringing out a bright finish, which is necessary for the sale of the goods-the appearance of them. That machine, if my recollection serves me correctly, cost us something like $1,200 or $1,500. We did not have it in operation long-it had been on the market for quite a number of years-we did not have it very long until there was a process adopted called the dry process of finishing, whereby we could black through a rack of shoes, and, after we had gotten through, then we could commence right away and finish the shoes over the burnisher and brushes. That new machine was substituted for the Tapley machine, and we threw it away, and I think we have it in the warehouse that we built, where we have thousands of dollars' worth of old machinery stored now, because it was absolutely no good to us.

Well, another thing of very serious consequence was the matter of service. The companies only had intermittent service in regard to fixing the machines and keeping them in order, because they sold machines to us, and, while there were a few of them that had a little royalty attached to them, it was not of material consequence, or so much so that they were induced to give us the service. And that matter of service is one of the main things that we want to impress the committee with, so far as it relates to our particular business and our location where we are.

This machinery proposition was of such a serious nature that it created considerable friction among our stockholders. They could not understand why we had to keep on buying machines and sinking our money in machines. We had to increase our capital. We started with $50,000, and we had to raise it to $100,000, and then we had to raise it to $150,000, which it is to-day. We had to do this in order to keep up and have money enough to keep in business. Of course, if we had been doing and could have done a very large business, where we could have accumulated, while the profit on a single pair of shoes is very small, if we could have made large sales we would have ac

cumulated a larger fund, and that would have been all right and satisfactory. But we have never been in position where we could do that, which I may touch on afterwards.

It produced constant friction with our stockholders. They were not versed in the matter of making shoes. They were absolutely ignorant of the details of shoemaking, and it created a great deal of dissatisfaction. I had hard work explaining to them, and the mere statement that this was so and so was not very often convincing enough. I never did convince them in my explanations of it. They were dissatisfied with the business, and naturally so. I do not blame them.

Another feature along about that time was this: We received-I do not know how often, but we did receive on several occasions notices of infringement of machines, where one company would notify us that a certain machine we were using in our factory that we had bought of another company was an infringement on their machine. While we never had any trouble-it never resulted in any trouble to us; at the same time it destroyed our peace of mind to a considerable extent, because we never knew what trouble it would make us. While we tried to pacify ourselves that the company that we bought the machine of would stand behind us in the case of an infringement, yet we did not know whether they would be in business or not.

When the consolidation took place we thought that we recognized immediately that that would be an advantage to us after we had learned what their method of business was going to be, particularly in the matter of service than anything else. And we felt that if the expense of the machinery department of our business was not any larger and that they would render us the service of taking care of the machines, it would be quite an advantage to us and a much better way to operate.

For the first five years after their consolidation, I think-I have taken occasion to try to remember-I think it was about 1899 or semewhere along there that they combined the three principal companies that were furnishing the principal bottoming-room machinery, and I think until about up to 1894 or 1895 or 1896 they were charging for certain of their machines an initial cost beside the royalty.

Well, now, that immediately simplified to us the question of machinery cost. As I stated a while ago, there are three principal items of cost in the making of shoes-the material, the labor, and the machinery cost. We never had been able to settle upon a stable machinery cost, because of the reasons set forth, that we had so many cases where we had to buy new machines which we were induced to think were improved machines. Some of them were and some of them were not. Some of them were practically useless to us. But we had to keep on buying the machines, and had to put our money into them. We have used certain machines for a few months and then have thrown them away.

We found that we could then determine the stability of the machine cost, because it was about on a stable royalty basis and the royalty was made uniform to everybody, all shoe factories, and so we know that we could not be taken advantage of in that way.

Four or five years ago, I think, they had practically dropped their initial part of their charging, except, I think, on a few machines,

which did not amount to very much, and charged a royalty except on what are called auxiliary machines. They have invented auxiliary machines. What we mean by that is smaller machines for preparing the shoe for the operation of larger or more important machines; doing the work that was formerly done by hand-such as certain skiving machines or shank-skiving machines and sole-laying machines, and such machines, where they charged us a very low, nominal amount of rental per year-from $5 to $50 a year those machines would cost us. Some of them cost as low as $4 a year. Then there are some other auxiliary machines where they charge us no royalty at all, but where they get their compensation by reason of the fact that we buy material from them.

Now, as I understand it, and I have read over the petition in regard to the case that has been brought up against them, these conditions are claimed to be oppressive. I can not say anything about anybody else except ourselves, except through hearsay.or through the canvass that some of the papers have made in regard to the smaller factories of the country as to their attitude and their treatment that the company has given. I can say absolutely and truthfully that it has been of great advantage to us; that it has simplified our business; that on a small sheet of paper, covering no more than 4 inches square, we can cover by tabulated statement, the royalties absolutely entering into the cost of the machinery cost, as covering the particular machines that the United Shoe Co. furnishes.

Now that, as I stated awhile ago and I wish to touch on it again, is the question of service that we had in our peculiar location. In other words, we pioneered in the shoe business of building a factory on the prairies of Iowa to make a kind of shoe that nobody in the shoe-manufacturing business thought it would be possible for us to make or succeed in doing. And I think, honestly think, that we would have been out of the business before this if we had not had a condition come about whereby we could have arranged to know definitely right along, through the year and all time, the absolute machinery cost to us.

The service is what I refer to now, and I will give you some concrete examples of what I mean.

We put in about three months ago what is called a "puller-over machine." It is a very complicated machine for doing what seems to be a very simple operation. The pulling over means the placing of the upper, which is the leather part of the shoe, over the last and having this machine pull this upper over the last in the proper place and position on the last as it should be when the shoe is completed and driving a few tacks in just to hold it preparatory to lasting it, and the lasting consists of putting through another machine where it is tacked down all around securely preparatory to sewing on the sole or welting, if it is the case of a welt shoe. This puller-over machine is a machine that has been evolved and has been for several years being made to the point where it would do the work. That work was formerly done by hand. The machine had not been out very long until they made an improvement on it, as they have done with lots of their machines. Their policy always has been-and there has been no question about it; they have never deviated from it; it has been upon their own initiative and has not been from any

solicitation on our part-that we could have a new machine whenever we desired it. We would simply make application for it, and they would furnish us with a new machine. They send the new machine to us, and we send back the old machine. We pay the freight on both the machines, and that is all the cost there is to us for the improved machine. Then when the machine arrives and we get ready to have it set up-it may have come to-day, and we may want to wait until two or three days until we get to a certain stage in our work before having it set up, for it usually takes a day and sometimes a little more to set it up-when we get ready to have it set up we wire into Chicago-that is our source of supply. They keep a branch agency there, and also one at St. Louis, but we get our service from Chicago. We wire into Chicago for a man and he comes the next morning. That is to say, it is prearranged. They will notify us between when a man can come over, and if the machine is there we are to wire if we want the man to come within that time. He comes and sets the machine up and gets it in running order, teaches an operator to run it, and stays there until he has taught him. That is what they do when we make this change. They send us the improved machine, and we send back the old machine; the man stays two or three or four days and teaches our operators how to run it. That was a very complicated machine; hard to operate and new to them, requiring a special expert machinist to run and operate the machine.

Nobody in our town could fix the slightest thing that happened to any of those complicated machines. We would not think of allowing them to tamper with them. My brother could not do it, although he can sometimes in light matter fix the machines, but so far as going into the machine and taking it apart and readjusting it and fixing it in a vital part is concerned, he could not do that. We always send for a man.

After having taught this operator this agent went to Des Moines. He had some work there with Bentley & Olmsted, who are manufacturing men's shoes. He went down one evening, and the next morning about 10 o'clock this machine, for some reason, would not go; it stopped. The operator could not handle it, and the foreman in the room did not know what was the matter with it. My brother went up to see about it, but he did not know what was the matter.

When you consider that the process of making shoes consists of going through one machine for a certain operation, and then going to the next machine for another operation; that when one machine stops we are tied up. That just stops the work right there. Unless we have some supply of shoes on hand that have been prepared for this next operation we might as well discharge and let go for the time being all our operators until we could get this machine fixed.

We called up this agent over the telephone in Des Moines and stated that we could not operate the machine, that it was out of commission and that we did not know what was the matter with it. He took the interurban train from Des Moines to Fort Dodge and got up at 3 o'clock of the same day that the machine stopped. He went into it, and in 10 minutes' time found out where the trouble was. It was the head of a screw that had fallen out of some part of the machine and had gotten into the mechanism and stopped it. He had

it fixed in 10 minutes so that the operator went along with his work. He took the 5 o'clock interurban train back to Des Moines.

Now, there was no expense to us for that service; they rendered us no bill. We never pay them anything. It is part of their plan to give this service because it is to their interest, as we understand, to have the machines running, because in that manner they get their compensation.

Now, the cost of the royalty to us, as I stated awhile ago, we have it, when we come to figure our samples-we have the royalty cost on a little sheet of paper no larger than 6 inches square; it comprises the entire royalty cost of those machines, and we know exactly. In figuring up the cost of the samples we have a card like this that is ruled with four or five columns, and with every item of labor and every item of material and royalty for each identical sample, so that we know the total cost. We will take, for example, a pair of $2.25 welt shoes, wholesale price. We know by referring to this card just what that royalty cost will be on that $2.25 shoe, and we know that it will not change during the season.

Now, why do we know? We know because they do not charge us one cent for any improvement for any machine that we have put in. They give us an exchange, so that we will know that we will not have to buy any improved machine or put any money in any improved machines for the purpose of keeping up with our heavy and strong competition with the large shoe factories of this country. We know also that we are not paying any more than they do. We know that so far as the machinery cost is concerned we are exactly upon a competitive basis with them. So that that is so simplified, that particuÎar important part of our business, that we can reasonably expect to be able to make a little money if we come as close in our figuring in other departments as we do in that. In fact, we get the closest to that cost; we absolutely know what that is.

In regard to the labor cost, while we can get very close to that, because we pay practically all our labor by piece for each operation, yet there is an item of overhead expense which is variable, in accordance with the volume of business, etc., that we do not get so close to it there.

Then in the matter of materials we can practically cover that, but there is a little deviation there. We have to approximate the amount that we want to use during the season. Should our business run over the amount we had contemplated, we might have to buy a little bit. more and pay an advance for the material.

I want to go back a little. My attention was attracted some time ago to an article in a magazine accidentally that I happened to read, and I read it through, and I thought I saw intuitively that what has taken place up to this moment would take place, if the idea got circulated through the country and among the people that the company was really doing what the article stated that it was doing. I knew that it did not apply to our particular business. As to whether the United Shoe Machine Co. is a monopoly or a combination or a conspiracy or anything of that sort, I have nothing to do. I do not know; that is not within my province to determine. But I do know, which nobody can controvert nor convince me, is that if we had not had the advantage of the United Shoe Machinery Co.'s machines on the service they have rendered us, we would not have been able to